ECON 2213 1ST EXAM 1 QUESTIONS AND VERIFIED
ANSWERS
What is economics? - Answers - the study of how people make decisions with limited
resources
What is the difference between microeconomics and macroeconomics? - Answers -
Micro is the study of an individual or group. Macro is the study of the Economy as a
whole.
What is scarcity? - Answers - limited resources to satisfy human wants.
What are the factors of production and their rewards? - Answers - Land- Natural
Resources
Labor- Human Skills and Efforts
Capital- Man made goods that produce other goods
Entrepreneurship- management of other resources
What is opportunity cost? - Answers - value of the next best alternative given up.
What does it mean by 'there is no free lunch'? - Answers - everything has a cost
What is 'deciding on the margin'? - Answers - Similar to opportunity cost, but at a larger
scale in businesses.
What is meant by 'people respond to incentives'? - Answers - changes in rewards
attract people to change decisions
How do economists build and use economic models? - Answers -
What is ceteris paribus? - Answers - all other things held constant
What is the difference between normative and positive statements? - Answers - Positive
statement can be proved, normative cannot
What are the basic economic questions for every society? - Answers -
What is Production Possibilities Frontier? - Answers - a graph that shows the
combinations of output that the economy can possibly produce given the available
factors of production and the available production technology
ANSWERS
What is economics? - Answers - the study of how people make decisions with limited
resources
What is the difference between microeconomics and macroeconomics? - Answers -
Micro is the study of an individual or group. Macro is the study of the Economy as a
whole.
What is scarcity? - Answers - limited resources to satisfy human wants.
What are the factors of production and their rewards? - Answers - Land- Natural
Resources
Labor- Human Skills and Efforts
Capital- Man made goods that produce other goods
Entrepreneurship- management of other resources
What is opportunity cost? - Answers - value of the next best alternative given up.
What does it mean by 'there is no free lunch'? - Answers - everything has a cost
What is 'deciding on the margin'? - Answers - Similar to opportunity cost, but at a larger
scale in businesses.
What is meant by 'people respond to incentives'? - Answers - changes in rewards
attract people to change decisions
How do economists build and use economic models? - Answers -
What is ceteris paribus? - Answers - all other things held constant
What is the difference between normative and positive statements? - Answers - Positive
statement can be proved, normative cannot
What are the basic economic questions for every society? - Answers -
What is Production Possibilities Frontier? - Answers - a graph that shows the
combinations of output that the economy can possibly produce given the available
factors of production and the available production technology
